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My "Buy One, Get One Free" Burden

My wife made me give my 12-year-old suit to charity, so I had to get a new one. Men’s Wearhouse had some nice outfits, and I was willing to pay a lot for a good suit.

Top-of-the-line models were available for $600, and they were on sale: “Buy one, get one free.” I was going to buy one even without the sale, and $600 was about what I wanted to spend. But I have almost no use for the “free” suit; I derive little consumer surplus even from a “free” second new suit.

I asked if I could get half price on the one suit, but the manager said no. I hope I am typical and that when confronted with “buy one, get one free” deals, generally most people rationally prefer half price on each item. But I wonder if that is really the case.

discordian

I'm not a retail person, but I would think the buy-one-get-one thing is more about clearing inventory.

Leigh Caldwell

February 2, 2009 @ 5:02pm

I'm sure that most buyers would prefer a half price suit. However, most sellers prefer to receive $600 for merchandise that cost them $150 than $300 for $75!

But I recommend taking the opportunity to spoil yourself with an extra suit. It does have a bit of additional utility:

- you can wear suits more often, and stay looking dapper. Even if you don't care, your wife might like it. I would wear suits all the time if I had an infinite supply.

- you can have two different colours or styles, increasing the range of situations for which you have the right suit.

- your two suits will last longer than one, and (provided you buy them both the same size) the endowment effect will provide you with an extra incentive to remain trim and healthy.

Not compelling enough? Then enjoy doing your patriotic duty and stimulating the economy!

trader n

February 2, 2009 @ 5:06pm

looks like the workings of another paper professor hamermesh.

Aaron

February 2, 2009 @ 5:07pm

Unless you do not wear a suit very often, why would you have no use for a second suit? The second suit allows for variety and less wear and tear over just a single suit. As for the bogo, some people may not have use for the free item, but a deal is a deal and that trumps rationality sometimes.

BY

February 2, 2009 @ 5:07pm

They price stuff like that at our Kroger, but fortunately they let me buy only one--at half price.

Who needs to buy two suits at once anyway??

Ben

February 2, 2009 @ 5:09pm

Even worse are the 25% off deals wrapped in "buy one get another for half off" marketing.

Steve

February 2, 2009 @ 5:12pm

Donate the second one (actually the first one--the one that cost $600), and take a $600 deduction off your taxes! That should lower the price of your suit by almost half!

BP

February 2, 2009 @ 5:13pm

I picked up 2 suits there a couple weeks ago. The second suit may be free but he tailoring is not. My total tailoring for the 2nd "free" suit was about $40. With a total bill around $500 , I was happy.

Maybe if you had offered something more than 50% it would have helped.

James A

February 2, 2009 @ 5:13pm

I would think that the offer's ability to persuade people to buy would be more dependent on the need of the buyer. Men's Warehouse, through their own information, probably concludes that most people that buy their suits are men who need them 4-5 days a week and that the buy one, get one offer is the best. For you, it was not. It would be interesting what would happen to their sales if you made it an either or offer, capturing the best of both.

Steve

February 2, 2009 @ 5:15pm

Really? You absolutely only needed/wanted one suit (at the price point you were willing spend) and so you'd never wear the second "free" suit?

Sure, half-price is better when you only want one - one Big Mac is better at half price than 2 for 1 when you can't consume the 2nd Big Mac and I assume that if you are purchasing a yacht or Lear jet, having two is one too many. But on things like suits and cans of soup - non-perishable items that you may use any time in the future - 2 for 1 is great.

Rational/Typical Consumer

February 2, 2009 @ 5:16pm

Yes, Daniel, "most people rationally prefer half price on each item." Most would rather just by one at 40% off. But the store would rather you get an extra item out of their inventory and the ties, shirts, and socks you will need to match both.

Peter

February 2, 2009 @ 5:17pm

This is symptomatic of large inventories and need for cash on the part of retailers. That is, the suits are a sunk cost for Men's Warehouse, and their prospects of selling them at large profit are bleak in the current economy. So they are trying to milk as much revenue out of them as possible.

You're willing to pay $600 for a suit. They would love to sell you one suit for $600, but since most people have a marginal utility for a new suit well below that, and since price discrimination is very difficult for them, they offered you two suits for that price.

The store under normal circumstances would be indifferent to selling you one suit for $300 or two for $600, since they could sell the second suit to someone else. But sales volume is so terrible right now that there isn't a "someone else" to sell to. So they're left with either recovering $300 on sunk investment from you, or $600. The store vastly prefers the latter, because their suits have declined rapidly in value.

Ah, the joys of a deflationary spiral.

Read more...

Maria

February 2, 2009 @ 5:22pm

I guess the only option is to resell the second suit. You're stuck with it, you don't want it, and you could make at least a tiny profit from selling it.

Jim

February 2, 2009 @ 5:24pm

Of course people prefer the half price because then they get three options: 2 for the price of 1, 1 for half price or no deal. I don't think anyone would actually prefer the middle option to be taken away. I'm guessing the store thinks cash flow increases by removing the middle option. I'm guessing they were more interested in cash than inventory.

I'm reminded of seeing at a dollar store a tag that said: 5 for a dollar or 1 dollar each. I asked the cashier and he explained that at the dollar store, the cash register only had one button, $1, and that many people assumed that 5/$1 meant that they could buy one for 20 cents - which the cash register would not handle.

RZ

February 2, 2009 @ 5:24pm

You could always get the 2nd suit for free and give it to someone else or donate it to charity. Or hope that you won't change in size and start wearing it in 12 years when your wife gives your other suit away.

David

February 2, 2009 @ 5:26pm

Forget the gimicks: You can get a very nice suit at Jos A Bank for that kind of money. They have lots of sales -- I just buy on-line and they have excellent, excellent customer service.

KB

February 2, 2009 @ 5:28pm

Please, get the second suit. Wear it. Note last weeks post on how students think their econ. profs are so not hot. The second suit will help with that.

Now that's out of the way, I've often had the same thought. Supermarkets usually let you reduce the price of a single buy one get one free item, but not clothing stores. Do they make money from alterations, or does it count differently on commissions? Either way, by going 1/2 price they should move the same number of goods. Does the word free make for better advertising?

jacob

February 2, 2009 @ 5:31pm

should have asked for ~15 % off of 1. the store gets to book $600 in revenue when you buy two so they are better selling twice as many at half the price.

jacob

February 2, 2009 @ 5:34pm

find someone else who needs a single suit and order them together. the two just have to be purchased at the same time, not for the same person.